Displaying items by tag: oversupply

China: The Ministry of Industry and Information Technology has enacted new regulations requiring cement producers to align cement production with their registered production capacity. It further reminded the industry to adhere to a prohibition on building new capacity and an enforced phase-out of older existing plants. People’s Daily Online News has reported that the ministry is responding to the issue of oversupply and the need for sustainable development.

China Building Materials Federation (CBMF) has forecast a reduction in total national production capacity of 500Mt/yr under ongoing efforts. It plans to establish a disclosure and supervision platform for capacity management. Cement production fell by 23% between 2021 and 2024, according to CBMF data.

Cement producer BBMG Corporation said "We will restructure existing capacity, accelerate the phase-out of inefficient production and increase the share of advanced capacity to achieve value-added growth through optimising existing assets."

The Deputy Prime Minister of Egypt met with representatives of the cement sector last week to discuss the local market. The key topics were prices, increased production capacity and restarting suspended production lines. Then this week it was revealed that the government was preparing to issue two new cement plant licences by the end of 2025. So, what’s been happening in the local sector?

Readers may recall that the Egyptian government tackled overcapacity issues by way of cement production quotas back in 2021. This solved the immediate problems at the time but, since then, there has been a growing problem with local producers focusing on export markets to the detriment of the domestic market. For example, there was a shortage of cement reported in mid-2024 due to a shortage of trucks. Large quantities of these were being used, it transpired, to transport cement to neighbouring Libya. For more on this read Global Cement Weekly #760.

The price of cement peaked earlier in 2025. At this point the government took action by limiting cement exports to no more than 30% of a company’s production volume and by abolishing the quota system. It later reviewed the status of eight idle production lines in an effort to get them running again. Prices subsequently eased according to local media reports. Before the changes, the Cement Division of the Federation of Egyptian Industries said that the country had a production capacity of 76Mt/yr from 46 lines. Domestic consumption was estimated at 46Mt/yr and exports at 20Mt/yr giving a utilisation rate 87%. Note that this export figure is 30% of the total production of the country as a whole. For the first half of 2025, production increased by 24% year-on-year to 30.7Mt from 24Mt in the same period in 2024. Exports rose by 11.5% to 9.7Mt from 8.7Mt. However, data from Al Arabiya Business shows that exports fell by 25% in May and June 2025 following the government action. Production grew by 16%.

Vicat’s financial report for the first half of 2025 reported that export sales volumes in Egypt represented over 50% of the local subsidiary’s total sales volumes. It also noted that the domestic price surpassed the export price during the reporting period. Titan Group said that its local business had experienced an ‘impressive turnaround’ due to a construction boom in the country. It said that its plants operated at ‘high capacity’ with an alternative fuels (AF) thermal substitution rate of around 40%. It added that it was intending to expand storage capacity to support growing export volumes. By contrast, Cementir endured a tougher trading period due, in part, to less exports following technical problems related to the restart of a local production line.

A source quoted by Al Arabiya from the Export Council for Building Materials noted that there had been a ‘significant’ decline in exports to several major markets, including Libya, Lebanon, the US, Ivory Coast and Ghana. That anonymous source also warned that, if the problem with the domestic market could not be resolved quickly, then the sector risked losing export markets where reconstruction work was taking place. These comments were mirrored by Adam Khalil, a Building Materials Sector Analyst at Al Ahly Pharos Securities, who told local media this week that the anticipated reconstruction of Gaza presented benefits for Egypt-based construction and building materials companies. In particular, he noted the proximity of Sinai Cement to the Gaza Strip. Unfortunately, at the time of writing, the latest ceasefire between Gaza and Israel appears to have been breached.

The other part of the government action has been focusing on increasing AF substitution rates. At the meeting with the Deputy Prime Minister this month the stated aim was to reduce production cuts. To this end, a report on the number of waste recycling plants was reviewed and compared to the requirements of each cement plant. The government intends to set up ‘practical implementation mechanisms’ to maximise the usage of AF. Energy sources have been a particular bugbear for the cement sector in Egypt historically as the government has encouraged producers to switch fuels from time to time.

The wider economy in Egypt continues to face headwinds. Cementir, for example, in its half year report said that the country’s economy was “...being held back by high inflation, devaluation, rising energy costs, pressure on manufacturing industries and a revision of the state budget with the suspension of infrastructure projects.” However, the International Monetary Fund (IMF) upgraded its growth forecast for Egypt in 2025 and 2026 in mid-October 2025. The decision by the government to cap exports of cement and cut the production quota marks a serious change since 2021. It is clearly watching the situation closely. The timing from roughly in the middle of the year should make the effects clear to see in the annual reports in early 2026. We will wait until then.

Indonesia: The government has called on cement producers to expand exports and develop sustainable products to counter oversupply, according to Antara news. This comes after a visit by the Director General at the Ministry of Industry, Taufiek Bawazier, to the Solusi Bangun Indonesia cement plant in Bogo, West Java. Bawazier said that national cement production capacity currently stands at 122Mt/yr, while demand is only around 70Mt/yr, resulting in low utilisation and inefficiency.

Bawazier said “This is a serious challenge for the industry. If left unresolved, it could lead to unhealthy business competition. Strengthening the domestic component level policy is also a priority. Currently, local cement products have achieved a 60–70% domestic content level.”

He added that production capacity could be controlled by imposing a moratorium on new cement industry permits in regions where the market is already saturated. Several cement producers, such as Semen Indonesia, already export to Australia and even the US.

Indonesia: PT Indocement Tunggal Prakarsa (INTP) recorded a 6% year-on-year drop in cement sales to 3.9Mt in the year to 31 March 2025, according to local press. INTP corporate secretary Dani Handajani said that the beginning of the year was typically a low-demand period due to weather, Ramadan and Eid holidays, but noted that the company's sales decline was smaller than the national industry’s 8% fall. Good news also came from the development of the new capital city Nusantara, which is back on track after being delayed. The project is expected to boost cement demand in Kalimantan.

Handajani warned that Indonesia’s cement oversupply problem will likely continue in 2025, and requires government policies like a ban on imports and the construction of new plants in the country.

Saudi Arabia: Arabian Cement Company said in its 2024 annual report that work is underway to increase the production capacity of its fifth production line by the fourth quarter of 2025. The company also said it is progressing on a project to connect its Rabigh plant to the Saudi Electricity Company grid under the liquid fuel displacement programme.

It forecast that cement demand will rise in 2025 due to government and Public Investment Fund-backed development projects in the Makkah region. The sector is reportedly operating at 63% capacity due to oversupply and weak demand, according to Zawya News, although an interest rate cut in September 2024 led to a revival of real estate projects.

Vietnam: The general director of Vietnam Cement Industry Corporation (VICEM), Nguyen Thanh Tung, says that Vietnam will suffer continued cement overcapacity amid high production costs in 2025. Full-year production is forecast at 125Mt, 96% greater than an expected domestic demand of 63.5Mt. Việt Nam News has reported that Vietnam’s cement exports face an on-going investigation in Taiwan, and are already subject to anti-dumping duties in the Philippines.

VICEM aims to raise its domestic clinker sales volumes by 8% year-on-year to 18Mt, in order to generate sales of US$1.16bn. To this end, Tung urged the government to adopt cement reinforcement in roadbuilding, as well as lifting the export tax on cement.

Vietnam: Deputy director of Tan Quang Cement, Tran Van Hung, has proposed reducing cement plant capacity to address the significant supply-demand imbalance. With a current supply of 120Mt/yr and a demand of only 56Mt/yr, the oversupply has led to price pressures, according to the Vietnam News Brief Service. This strategy aims to stabilise prices amid rising input costs and declining sales, further challenged by China's competitive stance and increased export taxes.

Van Hung has suggested regulating plant operations through energy limits and penalties to control supply and stabilise prices.

Nepal: Exports of cement to India via the Kakarvitta road border crossing in Jhapa totalled 50,000t in the 2024 financial year, which ended on 15 July 2024. KhabarHub News has reported that shipments had a combined value of US$3.81m. The Kakarvitta crossing had not previously served to convey major despatches of cement between the two countries. The cement industry in Jhapa is 50% dependent on export markets for its demand. Eight plants operate in the district, of which three currently sit idle due to 40% local oversupply.

Vietnam: The Ministry of Construction has proposed resuming cement sector planning to the prime minister, addressing the critical oversupply affecting the industry. Cement planning ceased six years ago, leading to unregulated project approvals. Vietnam now faces a surplus, with 92 production lines and a total capacity exceeding 120Mt/yr, while domestic consumption lags at under 60Mt/yr and exports are only 30Mt/yr. The construction slowdown exacerbates the issue, with redundant clinker production capacity at approximately 50Mt/yr, leading to risk of cement producers going bust, unless suitable measures are introduced. The latest figures from the Vietnam National Cement Association (VNCA) show that cement plants are running at just 70-75% of their designed capacity.

Deputy CEO of Vicem, Nguyen Thanh Tung, said "Several production lines belonging to our system have to temporarily halt operation, incurred by low consumption and dwindling incomes. Despite all this, we commit to not selling products below the production cost."

China: Capacity utilisation in the Chinese cement sector has dropped to 50% in April 2024, down from 80% in April 2023. Reuters reported the development, citing data from China Coal Industry. Local coal suppliers reportedly face depressed demand.